Knowledge Base

Wednesday, May 23, 2012

In a classic bait and switch George Paz, CEO of Express Scripts, has subtly lowered the expectations for the ESI and Medco merger. As I learn more about George I'm not quite sure what to think about him. Here is what I've gathered thus far. He's a shrewd businessman, but not very smart, yet he's smart enough and frugal. George is also aggressive, but will change his position faster than Cory Booker if it will bring ESI an advantage. Sometimes to the detriment of his stakeholders.

Here are a few excerpts from an interview he participated in with the Wall Street Journal. It was published on May 23, 2012.

WSJ:What were the biggest disagreements with Walgreen?Mr. Paz:I should only be paying for things that matter. I shouldn't be paying for things that don't matter. And, if Walgreen wants a premium, and they're not doing anything different, why should I pay them more? One of the issues was the way Walgreen defined generic drugs. That would have been a billion dollar effect on my book of business. That would've been a huge windfall back to Walgreen that doesn't exist in any of my other [pharmacy] contracts.

[Regarding paying a premium, a Walgreen spokesman said virtually all other payers see that we are in line with the market and have us in their networks." On generics, the spokesman said that "Express Scripts insisted on being able to unilaterally define contract terms, including what does and does not constitute a brand and generic drug."]

WSJ: Talk about the role pharmacists should play in healthcare.Mr. Paz:I said one time that it shouldn't matter who counts to 30 for filling up retail prescriptions, and I caught a lot of grief for that, and probably rightfully so. But that wasn't the point. The point is that putting pills in a bottle doesn't change health outcomes. It doesn't matter whether you get your pills at Walgreen or CVS or Kroger. The reality is: What happens with that process? Who is taking care if that patient? It's not counting pills and sticking them in bottles. That doesn't add any value.

WSJ: How does Express Script use its pharmacists?Mr. Paz: I've taken those pharmacists and asked them to reach out to doctors. Doctors still misprescribe very often. They leave gaps with care. People with asthma, they they don't take their inhalers, they wait until they're sick, and by then, it's too late. Now we're already running up the bills and going to the emergency rooms. We're using our pharmacist to do the things they were educated to do, not to count pills. That's not where the value is.

WSJ: How might the company's size help drive down healthcare costs for individuals?Mr. Paz:Medicare and Medicaid costs are skyrocketing. The cost of compliance with some pretty tough rules has become very costly. If I'm small, I have to spend the same amount of money to comply with Medicare, whether I'm 10 members or I'm 10 million. By creating size and scale, I can spread those covers over more and more people, and therefore lower the costs per person.

There are so many contradictions in these statements I don't even know where to begin. First, he talks about paying only for things that matter. Well I've repriced more than enough of Express Scripts claims data to know that his clients are, in fact, paying far too much for things that don't matter.

And you're using pharmacists to call doctors at $55/hr? Primary Care Physicians are extremely busy and it takes several call backs to reach them. They don't want too hear anyone tell them about their gaps in care especially a PBM that restricts their prescribing options. This is a waste of time and money. Particularly, when you consider the increasing popularity of e-prescribing. Sounds to me like Express Scripts is searching for a reason to charge more for their service even when it doesn't add value. Control what you can control by implementing more compliance packaging, for example.

Furthermore, if Walgreen's, one of the largest pharmacy chains in the world, statement is even partly true with regard too Express Script's desire to unilaterally determine contract language then where does that leave a small to midsize company? No chance to not pay for things that don't matter is what's left for smaller companies dealing with Express Scripts.

There is so much incentive provided in this interview for payors to re-evaluate their pharmacy benefit. But, unfortunately most won't. Who cares if your PBM account manager and/or consultant is telling you it's raining outside when really they're peeing down your back. George Paz said, "our size should help drive down costs for consumers." Before the merger was approved it was, "will drive down costs for consumers."

I'm not saying that ESI doesn't provide a good service. Instead, I'm saying that their customers aren't being educated and as a result are paying far too much for similar services they could get for 20 to 30% less. You could be saying too yourself who am I too judge the CEO of a fortune 50 company. He must be more intelligent, trustworthy and industrious compared to the owner of a boutique PBM, right? I've got two words for you - George Bush.

Tuesday, May 15, 2012

Today, most health plans have one level of benefits for care rendered by an in-network provider and a lower benefit for services from an out-of-network provider. Insurance carriers encourage use of in-network providers because doing so helps control claim costs.

In-network providers have contracted with the insurance companies to provide medical care at reduced prices. In exchange, the insurance companies direct patients to the in-network providers. The arrangement increases business for the providers and decreases claims cost for the insurance company.

Treatment out-of-network is a different story. Out-of-network providers have no agreement or incentive to reduce prices and control cost. At times, however, they may provide a level of care or service that a particular patient needs or wants. Patients seeking care out-of-network need to be aware of the way their benefits will be calculated.

There is more to it than the out-of-network deductible and co-insurance. Insurance policies have clauses and exclusions against treatment that is not medically necessary. There are also provisions that the carrier only allows the Usual, Customary, and Reasonable (UCR) charge for a service provided.

Over the last few years, many carriers have begun to define their allowable charge or UCR limit as the amount negotiated with in-network providers. The difference can be substantial. For instance, if the retail price of a surgery is $4000, the discounted amount could be $2500, a $1500 discount. If in-network benefits are paid at 80%, the patient would owe $500 for the surgery (20% of $2500). A patient receiving care out-of-network would not receive the benefit of the discount.

Out-of-network benefits may be paid at 60%. The patient’s responsibility is 40% of the UCR amount of $2500 or $1000, plus the difference between retail and the UCR amount ($4000 - $2500) or another $1500. The total owed by the patient would be $2500 on a $4000 surgery.

To avoid surprises, it is important that your employees understand how out-of-network benefits are calculated. Some providers will agree to write off all or part of the balance. A financial agreement before receiving services is critical. After services are rendered, many providers are not willing to discuss discounts.

Thursday, May 10, 2012

Physicians' political views on healthcare reform vary widely, but the findings of a recent survey by Jackson Healthcare show that many agree on at least one thing: PPACA does not sufficiently reform the U.S. healthcare system. Jackson Healthcare conducted an online national survey of physicians to ascertain whether respondents believe PPACA effectively addressed previously stated physician concerns about healthcare reform. Those concerns, identified in earlier physician surveys by Jackson Healthcare, were stated as such:

Defensive medicine is a key driver of the ever-expanding cost of U.S. healthcare

Defensive medicine has important effects beyond cost

Tort reform fails to reduce the practice of defensive medicine

1,440 physicians completed the latest survey. Analysis of the responses indicates physicians do not believe PPACA provides the necessary reforms to alleviate their concerns and they gave PPACA an average grade of D.

Key Findings:

Nine out of ten physicians do not believe PPACA provides effective reform

52 percent of physician respondents believe PPACA will negatively affect their practice through decreased reimbursements, revenues and longer work days

20 percent of physician respondents believe PPACA will positively affect their practice as more patients access care and the number of no-pay cases decreases

11 percent of physicians are making changes to their practices in response to PPACA, including EMR / HER implementation, changing careers / retiring, opting out of Medicare / Medicaid

Physicians are equally divided on whether PPACA should be repealed (52 percent in favor of repeal
vs. 48 percent).

HSA Qualified Medical Expenses: Confusion between 502 and 213

Confusion exists about what is a qualified medical expense for Health Savings Account (HSA) withdrawals. Different government sources refer to IRS codes sections 502 and 213, as do industry sources. Consumers want a list of qualified medical expenses yet no one, not even the government, is willing to commit in writing.

I will attempt to clarify this confusing HSA issue. The Treasury Department has released guidance for HSA implementation and use. Treasury Notice 2004-2 was issued to clarify HSA rules and issues. Answer 26 of the guidance states “qualified medical expenses are expenses paid by the account beneficiary, his or her spouse or dependents for medical care as defined in Section 213d but only to the extent the expenses are not covered by insurance otherwise.”

This seems clear enough. So where does the 502 language come into play? IRS Publication 969 (instructions for HSAs) says that qualified medical expenses are explained in Publication 502. I believe 213 and 502 provide essentially the same guidance to HSA beneficiaries. Internal Revenue Code 213d is the actual code section dealing with the definition of medical expenses. IRS Publication 502 is the tax filing instructions when claiming medical and dental expenses on your tax return. Publication 502 is a summary of IRC 213 and is more simply written.

Hopefully, this provides some clarification on this matter. The aforementioned is my opinion; I cannot render tax or legal advise. Please consult your attorney or tax advisor to review the facts and circumstances of your particular case.

Tuesday, May 1, 2012

U.S. health insurers will pay $1.3 billion in rebates to consumers and employers this year under a provision of President Barack Obama's healthcare reform law that penalizes plans that devote too little of their premium revenues to health services, an independent study showed on Thursday.

The study, published by the nonpartisan Kaiser Family Foundation, said the data illustrated some of the tangible benefits that consumers and employers could expect from the embattled 2010 reform law if it survives two major legal and political election-year challenges.

Under the law, called the Patient Protection and Affordable Care Act, health insurers must spend at least 80 percentage of premium revenues on health expenses and quality improvements. The rule is intended to limit the amount the $850 billion health insurance industry devotes to marketing, administration and profits.

Kaiser, a nonprofit healthcare research group, found that 31 percent of consumers in the individual insurance market could expect to receive a total of $426 million in rebates on 2011 premiums, for an average of $127 per person.

About 20 percent of the insurance industry's market for large employers could receive $541 million, while more than one-quarter of the small group market that serves small businesses could look forward to rebates totaling $377 million. The rebates are due by Aug. 1 and most of the money is expected to go to employers rather than consumers.

The healthcare law has proved unpopular with many voters and could be struck down by the U.S. Supreme Court by the end of June or repealed next year if Republicans gain control of the Congress and White House in the November election. If the high court overturned the law, insurers would no longer be required to comply with the rebate provision.

A main target for public dislike is a reform provision that requires most Americans to buy private health insurance by 2014 as part of a plan to extend health coverage to more than 32 million people who are uninsured.

Reform advocates insist that much of the public's dislike for the law stems from a lack of knowledge about the advantages it offers to consumers and others.

Some of the biggest rebate payouts are expected in states, including Texas and Florida, where the reform law faces some of its stiffest opposition from Republican politicians and other conservatives.

"While the health reform law as a whole continues to divide the American public, there are tangible changes taking place that benefit consumers," said Kaiser President Drew Altman.

"Greater regulatory scrutiny of private insurance is improving value and helping to get excess costs out of the system," he added.

The Kaiser study is based on insurer filings to the standard-setting National Association of Insurance Commissioners and includes rebates already paid and insurer estimates of planned payments on 2011 premium revenues.